If you live in a planned community with covenants, you most likely have to pay monthly homeowners' association (HOA) fees and, at times, special assessments.
Here's how those fees and assessments are set: An HOA has a board of directors. Each year, the board develops a budget for the community and decides how much to charge each unit or household as a monthly HOA fee. But the board’s predictions aren't always accurate. Occasionally, the HOA might need to come up with more funds. In that case, the board usually has the authority to impose a special assessment to cover the one-time expense of a major repair or improvement.
Dues and assessments are often collectively referred to as “assessments.”
Generally, the monthly HOA fee consists of two parts:
So long as the HOA board accurately predicts which repairs will come due and when, the monthly dues should cover the current operating expenses and long-term maintenance.
Sometimes, the monthly fees might not provide enough to the reserves to cover long-term repairs. For example:
In these instances and others, the HOA can usually charge homeowners a special assessment.
Most HOAs have the power to place a lien on the homeowner’s property when the monthly dues or any special assessments go unpaid. Once the HOA has a lien on a homeowner’s property, it may foreclose as permitted by the Declaration of Covenants, Conditions, and Restrictions (CC&Rs) and under state law.
If you're facing a foreclosure due to unpaid HOA assessments, consider talking to a foreclosure attorney in your state to discuss all legal options, like working out a repayment plan with the HOA, available in your particular circumstances.